- GDP growth will likely slow by at least 1% in 2025, with the risk of recession rising. Some economists are now projecting a 45% chance of a recession.
- Unemployment likely rises as growth slows. Oxford Economics thinks the unemployment rate could reach 5% in 2025.
- Inflation will occur due to the tariffs raising the price of goods. According to Oxford Economics, inflation could rise to 4% in 2025. It is unclear whether this will be a one-time rise in prices or if inflation expectations could rise as well.
- Stagflation (slow growth, high unemployment and high inflation) is a risk. We don’t think it will be like the 1970s, absent a shock like the oil embargo.
We expect the Fed to be slow to act until they see more data. We believe they are currently more concerned about inflation and may not cut rates, running the risk of further slowing economic growth.
- Extension of 2016 tax cuts
- Cuts to the corporate tax rate
- Corporate tax breaks on equipment spending and structures (possibly as high as 100% and retroactive to January 1, 2025.)
- Tax breaks on tips, overtime, social security
- Raising the SALT deduction from $10,000 to $25,000
- The Optimistic View - By making foreign goods expensive, helping companies grow with tax breaks, and reaping some tariff revenue, the US will bring more production back to our country. We will eventually see increased GDP growth and better jobs as a result of private enterprise investments in the U.S. economy.
- The Pessimistic View - We get low growth, higher unemployment and higher inflation aka stagflation.
- The unpredictability of President Trump and what he does next.
- Do U.S. companies with all time high margins absorb all or some of the price increases?
- How do U.S. consumers react to higher prices?
- What is the extent of retaliation from other countries?
- Are there buyers strikes from international consumers of U.S. products?
- What are the effects of inflation on purchasing power?
We believe in having clients appropriately positioned for their financial goals and able to withstand the ups and the downs of the stock market. To that end, we reduced equity positions in February where needed, and we rebalanced individual stock portfolios to companies that would perform in a slower growth environment. The next market move is uncertain and could be up or down depending on President Trump’s next proclamation and associated reactions. Panic is not an investment concept.
Please reach out if you have specific questions, changing needs or want hand-holding.
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